Rosenberg Research, an economic consulting firm, believes the TSX will outperform its U.S. counterparts if the Bank of Canada cuts interest rates ahead of the U.S. Federal Reserve. It happened on June 5, 2024, and the American central bank has yet to move.
However, as of this writing, Canada’s primary stock exchange is only ahead of the Dow Jones Industrial Average at +6.13% versus +4.3%. The broader S&P 500 Index is up 16.1% year to date, while the tech-heavy Nasdaq Composite outperforms with +21.2%. Nonetheless, there are viable and lucrative options on the TSX.
Growth investors should consider taking positions in ADF Group (TSX:DRX) and Vitalhub (TSX:VHI). These small-cap stocks are soaring this year. Given their astronomical capital gains from a year ago, I’d buy them without hesitation. Both also carry “strong buy” ratings from market analysts.
Niche player
ADF, which is in the industrial sector, operates in the metal fabrication industry. The $474.4 million company specializes in connection engineering, fabrication and installation of metal frames and heavy steel components. Industrial stocks are relatively stable thus far in 2024 (+8.08%), but at $15.52 per share, current ADF investors enjoy a 124.48% year-to-date gain. The overall return in three years is 305.3%.
In addition to offering turnkey service to its engineering service, ADF produces 125,000 tons of steel annually and specializes in complex installations. The company provide services such as design & engineering, fabrication & coating, and construction to clients in Canada and the United States.
ADF’s net income in fiscal 2024 (12 months ending January 31, 2024) climbed 151.9% to $37.6 million compared to fiscal 2023. In the first quarter (Q1) fiscal 2025, net income jumped 184.2% year over year to $15.3 million. The top line increased 33.8% to $107.4 million versus Q1 fiscal 2024.
“We started the 2025 fiscal year strong. With revenues for the three-month period ended April 30, 2024, exceeding $100 million, we are building on the momentum of the recent quarters. This increase in revenues also allows us to improve our margins and thus record a significant increase in net income,” said Jean Paschini, board chairman and chief executive officer (CEO) of ADF Group.
Market analysts’ 12-month average price target is $23, or a 48.2% potential upside.
Digital transformation
The healthcare sector’s year-to-date gain is 2.49%, but Vitalhub outperforms with +87.25%. Had you invested $6,500 on year-end 2023, your money would be $12,151,57 today. This $387.25 million company operates in the health information services industry.
Vitalhub began operations in 2010 and provides technology solutions for health and human service providers in Canada, the U.S., the United Kingdom, Australia, Western Asia, and internationally. Allied solutions include electronic healthcare records, case management, care coordination and optimization, healthcare records, patient flow, engagement, and operational visibility.
Its CEO, Dan Matlow, said VitalHub kicked off 2024 with outstanding momentum. In Q1 2024, revenue rose 21.4% to $15.3 million versus Q1 2023, while net income skyrocketed 713% year over year to $1.32 million. Matlow concluded, “As we move through 2024, VitalHub is well-positioned to continue our growth trajectory.”
Vitalhub plans to expand its reach in existing markets, explore new opportunities, and enhance its product portfolio. Matlow is confident that its strong financial position supports the ambitious growth plans and Vitalhub to lead the digital transformation in healthcare.
Unstoppable momentum
ADF Group and Vitalhub are winning investments in 2024. With impending rate cuts, both stocks should continue their upward momentum.
